Running head: Costing

Methods 1

Costing Methods Paper

The Super Bakery Inc. is a cybernetic company which outsourced their principa business products. !utsourcing a owed Super Bakery to "ocus on their core competencies and regu ate the surge o" acti#ities responsib e "or their re#enue without attaining the immeasurab e accountabi ity o" accepting the risks associated with the #arious stages o" transaction and production. This concept $usti"ies the rea i%ation o" the organi%ation&s ob$ecti#e to reduce their e'penses( otherwise e'penses wou d be incurred with the ac)uisition o" app icab e resources re ated to the se#era processes in#o #ed in the day to day operations o" the business( which inc ude production e)uipment uti i%ed in the production o" #arious products( preser#ation o" the production e)uipment in addition to repairs as we as rep acement as needed and production costs. !#erhead e'penses such as water( e ectricity( wages and sa aries "or those emp oyees c ose y re ated to the process as we as raw materia s are a e'amp es o" production costs. Super Bakery uti i%ed customary costing methods( which depended on itemi%ing the costs "or the #arious cong omerates uti i%ed to achie#e the numerous tasks at their re)uest( which consisted o" them isting each organi%ation&s schedu e that indicates their re#enues a ong with their indi#idua costs are not unre ated to their costs schedu e. This method a owed the de"initi#e cost per product to be e#en y distributed in their merchandise per unit. *s a resu t( the di""erence in the cost per unit con"iguration is concea ed by their integration.

Activity Based Costing, ABC The acti#ity Based Costing method is high y more e""ecti#e than the other con#entiona methods as it emphasi%es the costs re ati#e to the actions which coincide with the actua production o" each speci"ic product. Indirect costs "or a speci"ic product are rep icated in its direct cost there"ore pro#iding Super Bakery with a precise depiction o" the cost+e""ecti#eness o" their numerous products. In addition( Super Bakery can "o ow the mo#ement o" costs more competent y and most e""icient y in addition to the preparation o" incisi#e pro"it+re ated "orecasts "or their #arious products gi#ing them u timate contro o" costs o" the sectors in#o #ed. ,n"ortunate y( the *BC method is not the most appropriate method "or Super Bakery Inc. since they are persuaded toward costs reduction as its u timate source in their )uest "or increased pro"its as by de"inition accepts a costs which are sustained within the unit production and are precise y accredited to that speci"ic product. ,n"ortunate y( the *BC method is not the most appropriate method "or Super Bakery Inc. since they are persuaded toward costs reduction as its u timate source in their )uest "or increased pro"its as by de"inition accepts a costs which are sustained within the unit production and are precise y accredited to that speci"ic product. *dditiona y( "a se re" ection is an aspect re ated to costs to the company( which is e'treme y misused by the #arious "irms Super Bakery contracted there"ore intensi"ying the organi%ation&s ob igation in re ation to the costs. -a si"ication is e'perienced by most organi%ations. -ina y the *BC method is comparati#e y cost y due to its comp icated en#ironment as it re ates to the organi%ation&s in#o #ement in detai ing the cost per acti#ity "or se#era sub+

contractors. ,ti i%ation o" this method wi resu t in Super Bakery incurring more costs rather than minimi%ing their costs( which is their goa .

Job Order and Process Costing System The $ob order system is the u timate method "or Super Bakery since they are in#o #ed with #arious products. This cost method system wi a ow the organi%ation to track the cost o" production per unit without the in#o #ement o" unre ated e'penses. Process costing is an important part o" warehousing and shipping as we as production within companies that Super Bakery has sub contracted to hand e the production o" simi ar Super Bakery products. *s a resu t( process costing "or distincti#e companies "unctions as instrument o" rati"ication "or Super Bakery Inc.( enab ing them to achie#e their ob$ecti#e to contro costs.

References
Types of Accounting Costing Systems